Telstra 2007 Annual Report Download - page 113

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Telstra Corporation Limited and controlled entities
Remuneration Report
Equity compensation – Directshare
Directshare aims to encourage a longer-term perspective and to align the directors’ interests with those of
our shareholders.
Through our Directshare plan, non-executive directors are required to sacrifice a minimum of 20% of their
TRP towards the acquisition of restricted Telstra shares. The shares are purchased on-market and allocated
to the participating non-executive director at market price. The shares are held in trust and are unable to be
dealt with for 5 years unless the participating director ceases to be a director of Telstra. Although the trustee
holds the shares in trust, the participant retains the beneficial interest in the shares (dividends, voting rights,
bonuses and rights issues) until they are transferred at expiration of the restriction period.
If a non-executive director chooses to increase their participation in the Directshare plan, they take a greater
percentage of TRP in Telstra shares, and their cash component is reduced. As the allocation of Directshares
is simply a percentage of the non-executive director’s TRP, it is not subject to the satisfaction of a
performance measure.
Directors are restricted from entering into arrangements which effectively operate to limit the economic risk
of their shareholdings allocated under the Directshare plan during the period the shares are held in trust.
Superannuation
Mandatory superannuation contributions are included as part of each director’s total remuneration.
Directors may choose to increase the proportion of their remuneration taken as superannuation, subject to
legislative requirements.
Retirement benefits
In accordance with good corporate governance practice, we do not provide retirement benefits for directors
appointed after 30 June 2002. However, non-executive directors appointed before that date were eligible to
receive retirement benefits on retiring as a director.
At the annual general meeting on 25 October 2005, we explained that retirement benefits would cease to
accrue. This meant that directors who were appointed before 30 June 2002 would receive cash equal to the
benefits accrued to 25 October 2005 upon retirement. The benefits accrued were indexed by reference to
changes in Telstra’s share price between that date and the date the director’s retirement takes effect.
Furthermore, The Board resolved on 29 March 2007 to provide the opportunity to Directors eligible for a
retirement benefit to be credited with an amount equal to their accrued retirement benefit as at 18 May 2007
in their account with the Telstra Superannuation Scheme. As a consequence, all directors agreed to
terminate their existing retirement benefit arrangements and be credited with an amount equal to their
accrued retirement benefit in their member account with the Telstra Superannuation Scheme.
This approach preserves the principle that directors should not be entitled to retirement benefits aside from
receipt upon retirement.
Figure 19 shows the increase in retirement benefits payable to non-executive directors appointed before 30
June 2002 and the value of the payment to the director if he or she had retired on 18 May 2007.